China's steel market is entering the peak "Golden September" season, with prices expected to move in a volatile but firm range, supported by policy expectations, demand recovery, and cost factors—though upside will depend on actual demand take-up. Steel mill margins have turned negative again as costs rise and prices ease, curbing production appetite.

Manufacturing PMI rose to 49.8% in August, with equipment and high-tech sectors supporting flat steel demand, while policy support from special bonds bolsters sentiment. However, property starts remain sluggish and exports face trade headwinds. Supply faces a tug-of-war between cuts and restarts, with some lines ready to resume but output likely contained if peak-season demand disappoints.

Demand shows seasonal improvement but structural divergence: construction steel is picking up modestly with infrastructure support, though property remains a drag; manufacturing steel is stronger, driven by machinery, shipbuilding, and new energy orders. Costs remain elevated, but any easing in coal supply could weaken support. Overall, prices are likely to edge higher in September, but gains will be capped.